[NYSE:NKE]: Nike (NYSE:NKE) is a market leader in the sports apparel and shoe market. In fact, it is one of the most recognized brands in the world. However, in spite of Nike’s strong position, external market conditions such as the trade war between the U.S and China, Brexit among others are creating uncertainties in the global economy. With such challenges, the most important thing that an investor can focus on are the company fundamentals. Only companies with strong fundamentals are best positioned to maintain stability in this market. Nike is one of the companies with strong fundamentals to help it survive and maintain stability in an increasingly uncertain macroeconomic climate.
One of the factors that place Nike in a good position is its strong cash position. Nike has a levered free cash flow of $3.13 billion. This places it in a good position to absorb shocks that may arise out of any shocks in the global economy. For instance, through its strong cash position, Nike is in a good position to keep investing in research and development, even in a situation where shocks in the global economy affect liquidity for such ventures. This makes it a safe stock under any market conditions.
On top of that, Nike’s strong position is enhanced by the fact that it has a very low risk of defaulting on its debt obligations. The company has a current ratio of 2.31, which indicates that it can comfortably meet all its current debt obligations with ease. This is a source of strength because, it means that even in a scenario where macro-economic issues lead to a decline in sales in the short-term, Nike would be in a position to meet all its debt obligations, and still continue with its operations with ease.
Another factor that puts Nike Inc. (NYSE:NKE) in a good position going into 2019 is its heavy focus on the sports market and the fact that it is the most recognized brand in the world when it comes to sports clothing and shoes. This leadership position gives Nike the leeway to innovate and maintain strong sales regardless of the macro-environment. Besides, people who love sports don’t stop buying sports attire due to weaknesses in the economy. This means that for a company like Nike that has dominance in this market, chances of a major slide in revenues due to a weakening of the global economy are likely to be minimal.
Lastly, Nike Inc. (NYSE:NKE) prospects are enhanced by the fact that trade relations between the U.S and China could ease up in 2019. That’s because, the two countries recently agreed to put a hold on some tariffs. Besides, president Trump seems to be more focused on automobiles at this point, which eases pressure on companies like Nike, in terms of possible tariffs by the Chinese government. Nike’s business in China has gained momentum over the years, which means that in a friendly business environment, Nike’s sales will continue to grow, and this will be a stabilizing factor to its share price in 2019.